An influential Democrat who was also one of the world’s top-ten, highest-paid hedge fund managers last year thinks he knows which book is at the top of the White House reading list this spring: "Animal Spirits", the powerful new blast of behavioural economics from Nobel prize-winner George Akerlof and Yale economist Robert Shiller.

Judging by the upbeat economic message we have been hearing from the White House, the Treasury and even the Federal Reserve over the past six weeks, that is a shrewd guess. The authors argue that “we will never really understand important economic events unless we confront the fact that their causes are largely mental in nature”. Our “ideas and feelings” about the economy are not purely a rational reaction to data and experience; they themselves are an important driver of economic growth – and decline.

In a recent news conference, reporters asked Professor Shiller to explain the methodology of his research. Shiller coyly smiled, bringing the room of awed journalists to tears of joy. "We are saved!" shouted CNBC Business Analyst Erin Burnett.

The work of behavioral economics is so revolutionary that it has already garnered many converts as professors are hurriedly rushing across campuses worldwide to discuss its importance. Yet, here at Motley Fool, we have no long known about the sagacity of the esteemed Yale Economist.

His astute analysis can be traced back before the crash of 2007, which he accurately predicted using Mood Economics.

"Nothing I did (professionally) was ever part of the core theory (but) I had to downplay my own beliefs. I couldn't get up there and say a depression was coming, not in front of the students. I would have been considered unprofessional." - Robert Schiller

Ron Paul: I've Wasted My Life

Schiller's tremendous revelations have been hard to swallow for some, however. Congressman Ron Paul, longtime Libertarian and Gold Standard proponent, is left to contemplate years of misguided economic theory.

"Perhaps I should have stuck to the medical profession," he sullenly opined. "I delivered over 4,000 babies, you know. I was pretty good." When a reported inquired, "Do you think you could have delivered 6,000 if you had only smiled more," Dr. Paul broke down, sobbing uncontrollably. Even though we at TMF are happy to see his wacko theories discredited, we hope that he'll smile again one day. As Akerlof and Shiller have proven, our economy needs the happiness of everyone to survive.

AustrianSchool Devastated

In response, the marginal and outcast Austrian School has all but admitted that its work is now completely discredited and the Ludwig Von Mises Institute has closed its doors. Everything is being auctioned of, including a bust of Mises' head. Over the past 100 years they have foisted upon us their Libertarian free-market chicanery, although admittedly they have made a couple of lucky calls. Still their theories are now clearly obsolete.

And many other Austrian School ideas are so out of touch with mainstream academic thought it is foolhardy to even waste our time with them. We can only hope Schiller's studious and thought provoking work on Mood Economics will finally send the Austrian School into the trash bin where it belongs.

UPDATE: In the face of Schiller's smashing success, the Austrian School has responded by renaming their Business Cycle Theory the "Super Happy Fun Theory of Interest Rates," in a desperate attempt to gain wider acceptance among the intellectuals. This reporter overheard Paul Krugman at dinner reacting positively to the new Happy Fun Theory as he remarked to guests "It sounds neat, but what the heck is an 'Interest Rate?'"

If you are really interest in this stuff, I suggest doing a quick google search for neuroeconomics. I just started working in a very famous lab for this kind of stuff (as a lowly intern) but the research we do is amazing. I can't say specifics due to a NDA but this emerging field offers so much. It is simple psychological models and not math or fundamentals or TA that will be the next big thing.

I think he should be working for Wonkette. The Onion's a lot funnier and has a lot less blatant political attacks thinly veiled in comedy. I was actually genuinely amused until he showed his cards with the unneccessary stock 'wacko' accusations. Any fire he draws will be purely his own doing.

"And it seems to me perfectly in the cards that there will be within the next generation or so a pharmacological method of making people love their servitude, and producing ... a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda, brainwashing, or brainwashing enhanced by pharmacological methods." - Aldous Huxley

Yes I have. I admit that I first I thought you were attempting to add to my satire, but now I realize that you are serious. Your professors are following the Peter Venkman School of Economics. I suggest that picking vegetables may be a more productive use of their talents.

Sarcasm is lost on those without a sense of humor. I especially liked the Ron Paul bit about possibly delivering more babies had he smiled more. Good comedy!

Personally, I have no doubt a positive attitude has a real effect on your own self, and possibly the other people you interact with. Conversely, a negative attitude breeds more of the same, as the expression goes "misery loves company".

In the real world, I can not prove, but wonder if the constant negative drumbeat in the media and by the presidential candidates, and eventual new President, of "crisis" ... did it not help precipitate one? There is no double-blind controlled test to which one could determine any correlation from any reasonably accurate assessments, so we'll never know, but I really believe it made things worse. Oh, and on purpose.

If the dollar value of property, stocks and commodities are what we decide they are worth, then we just need to think happy thoughts and the value of everything will be high again. This is where Valium comes in. If the world water supply was fortified with vitamin V, then after a while, anxiety about buying stocks, commodities and properties would fade away and all would be well with the world again. There would be no concern about a scandal here or there, we’d be happy and rich. Markets have been manipulated by bad press and rumors; why not manipulate them with drugs? President Obama might try this or at least mass hypnosis, which he is probably good at, to bring about his miracle market recovery.